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TMI Blog2017 (1) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... the form of a penalty so that an opportunity should be given to the deductor to explain the reasons for delay before imposing such fee/penalty. As already held in Rashmikant Kundalia (2015 (2) TMI 412 - BOMBAY HIGH COURT ), "undoubtedly, delay in furnishing of TDS return/statements has a cascading effect. Under the Income Tax Act, there is an obligation on the Income Tax Department to process the income tax returns within the specified period from the date of filing. The Department cannot accurately process the return on whose behalf tax has been deducted (the deductee) until information of such deductions is furnished by the deductor within the prescribed time." The Bombay High Court has thereafter elaborated the consequences of delay in filing the statement. It is on account of the additional work burden which has fallen upon the department due to the fault of the deductor that a fee has been levied. We do not think that a different view can be taken in the matter. It is also held that the provision is not onerous even in the absence of a right of appeal as it is always open for the aggrieved person to approach the High Court under Article 226 of the Constitution of India. Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the statement in Form 24Q in respect of the 2nd and 3rd quarter was not filed in time. The due date for filing statement for the 2nd quarter was 15th October and the 3rd quarter was 15th January. The statement is to be filed online through the National Securities Depository Ltd. (NSDL). Even if the statements are made ready for uploading, it can be done only at the TIN Facilitation Centres (TFC) set up by NSDL and cannot be done by an individual or entity. The fee for e-filing of the statement and fee for other services rendered are paid by the deductors. Petitioner submits that on account of various factors beyond the control of the deductor, there was delay in uploading the details of statement within the stipulated time. 3. By Finance Act, 2012, Section 234E has been introduced to the Act with effect from 01.07.2012 by which a fine is being imposed for failure to deliver or caused to be delivered a statement within the time prescribed in Section 200(3). The fine is ₹ 200/- each for each days delay and the fee has to be paid before filing such statement. The Income Tax department has given to the petitioner a computer generated intimation under Section 200A of the Act de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed standing counsel on behalf of the respondents. 7. Before proceedings further, it would be useful to quote Section 234E, which reads as under:- "(1) Without prejudice to the provisions of the Act, where a person fails to deliver or cause to be delivered a statement within the time prescribed in sub section (3) of section 200 or the proviso to sub- section (3) of section 206C, he shall be liable to pay, by way of fee, a sum of two hundred rupees for every day during which the failure continues. (2) The amount of fee referred to in sub section (1) shall not exceed the amount of tax deductible or collectible, as the case may be. (3) The amount of fee referred to in sub section (1) shall be paid before delivering or causing to be delivered a statement in accordance with sub section (3) of section 200 or the proviso to sub- section (3) of section 206C. (4) The provisions of this section shall apply to a statement referred to in sub-section (3) of section 200 or the proviso to sub-sectioin (3) of section 206C which is to be delivered or caused to be delivered for tax deducted at source or tax collected at source, as the case may be, on or after the 1st day of July, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eductee tax payers." Further it is indicated that under the existing provisions of Section 272A of the Act, only a penalty is levied for the delay in furnishing TDS statement. However, no penalty is specified for furnishing incorrect information in the statement. Therefore, it is observed that the provision under Section 272A is not proved to be effective in reducing or eliminating defaults relating to late furnishing of TDS statement and it is in order to provide effective deterrence against delay in furnishing of TDS statement, the proposal has been made. The submission of the learned counsel for the petitioner is that when the intention of the legislature is to ensure that the TDS statements are filed in time and is not delayed, levy of such a fee and that too at ₹ 200/- per day without even considering the reasons for the delay is unfair, unreasonable and arbitrary. In order to levy fee, the department should take some steps by which they incur an expenditure and without any such expenditure, no such fee can be levied especially when a penalty procedure has been contemplated under the statute. 9. Learned counsel placed reliance on the judgment of the Apex Court in D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for services rendered". In bringing out the essential features of a tax this definition also assists in distinguishing a tax from a fee. It is true that between a tax and a fee there is no generic difference. Both are compulsory exactions of money by public authorities; but whereas a tax is imposed for public purposes and is not, and need not, be supported by any consideration of service rendered in return, a fee is levied essentially for services rendered and as such there is an element of quid pro quo between the person who pays the fee and the public authority which imposes it. If specific services are rendered to a specific area or to a specific class of persons or trade or business in any local area, and as a condition precedent for the said services or in return for them cess is levied against the said area or the said class of persons or trade or business the cess is distinguishable from a tax and is described as a fee. Tax recovered by public authority invariably goes into the consolidated fund which ultimately is utilised for all public purposes, whereas a cess levied by way of fee is not intended to be, and does not become, a part of the consolidated fund. It is ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did consider two circumstances which were relevant; the first that the levy was on a defined class of interested individuals, and the second that the fund raised did not fall into the general mass of the proceeds of taxation but was applicable for a special and limited purpose. It was conceded that these considerations were relevant but the Privy Council thought that the weight to be attached to them should not be exaggerated. In appreciating the weight of the said relevant circumstances the Privy Council was impressed by the fact that the lands in question formed an important part of the national wealth of the Province and their proper administration, including in particular protection against fire, is a matter of high public concern as well as one of particular interest to individuals. In other words, the effect of the impugned provision was that the expenses of what was the public service of the greatest importance for the Province as a whole had been divided between the general body of tax-payers and those individuals who had a special interest in having their property protected. It would thus appear that this decision proceeded on the basis that what was claimed to be a specia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apart and appropriated specifically for the performance of specified purpose. It is not merged in the public revenue for the benefit of general public and as such the nexus between the cess and the purpose of which it is levied gets established satisfying the element of Quid Pro Quo in the Scheme. Further, the Apex court held at para 33 as under:- "33. A Constitution Bench of this Court in Kewal Krishan Puri v. State of Punjab, while dealing with provisions of the Punjab Agricultural Produce Markets Act, 1961, held that the element of quid pro quo must exist between the payer of the fee and the special services rendered. Taking note of the well- recognized distinct connotations between "tax" and "fee", the Bench observed that a "fee" is a charge for special service rendered to individuals by the governmental agency and therefore, for levy of fee an element of quid pro quo for the services rendered was necessary; service rendered does not mean any personal or domestic service and it meant service in relation to the transaction, property or the institution in respect of which the fee is paid. A significant principle deduced in the said judgment wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the sales tax collection machinery. It cannot be stated that by establishing check post service is done to the assessees. It is further submitted that declaration forms and various other forms, records etc. are supplied by the Department. The declaration forms etc. are supplied on payment of a price. The assessees are doing a service to the Department by collecting tax from the customers and merely because return forms are given to submit return, it cannot be stated that a service is rendered as quid pro quo for paying registration fee. Thirdly, it is submitted that administrative expenses are incurred and it is on the increase every year. Sales Tax Act itself is enacted for charging tax on sales and purchases of goods. For establishing machineries for collection of sales tax, administrative expenses are incurred. Incurring of administrative expenses, paying salary to the Sales Tax Officials, maintaining of vehicles of the Department, establishing various offices etc. cannot be stated to be a service done to the assessees in return of charging registration fees. It was again contended that there are large number of exempted assessees and that some turnovers like second sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt held as follows:" "... The broad co-relationship between the imposition of fee and the nature of the service rendered to the entire textiles industry satisfied the test of quid pro quo, though no specific service was rendered to the payer of the fee......" But in all other cases sited before us including Kewal Krishan Puri v. State of Punjab ((1980) 1 SCC 416) etc. it was only held that eventhough an arithmetical co-relationship is not necessary, by and large, there should be quid pro quo." "11. We have already seen that actually no services are rendered by the Government in return for charging registration fees. The services said to have been rendered as quid pro quo for the fees levied are only incurring of expenses for assessment and collection of sales tax and purchase tax which is part of assessment expenses. No separate benefit is conferred on the assessees which has a direct and reasonable co- relation to the fee. In paragraph 5 of the counter affidavit filed by the State in O.P. No.11071 of 1993 it is stated that in 1987 Government introduced turnover tax. But it was objected to by the public. Therefore, turnover tax was withdrawn excep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch reads as under:- "47.1 Under Chapter XVII-B of the Income-tax Act, a person is required to deduct tax on certain specified payments at the specified rate if the payment exceeds the specified threshold. The person deducting tax (the deductor) is required to file a quarterly Tax Deduction at Source (TDS) statement containing the details of deduction of tax made during the quarter by the prescribed due date. Similarly, under chapter XVII-BB of the Income-tax Act, a person is required to collect tax on certain specified receipts at the specified rates. The person collecting tax ('the Collector') is also required to file a quarterly Tax Collection at Source (TCS) statement containing the details of collection of tax made during the quarter by the prescribed due date. 47.2 In order to provide effective deterrence against delay in furnishing of TDS/TCS statement, the Finance Act, 2012 inserted section 234E in the Income-tax Act to provide for levy of fee for late furnishing of TDS/TCS statement. The levy of fee under section 234E of the Income-tax Act has proved to be an effective tool in improving the compliance in respect of timely submission of TDS/TCS statement by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sub-section, "an incorrect claim apparent from any information in the statement" shall mean a claim, on the basis of an entry, in the statement-- (i) of an item, which is inconsistent with another entry of the same or some other item in such statement; (ii) in respect of rate of deduction of tax at source, where such rate is not in accordance with the provisions of this Act. (2) For the purposes of processing of statements under sub-section (1), the Board may make a scheme for centralised processing of statements of tax deducted at source to expeditiously determine the tax payable by, or the refund due to, the deductor as required under the said sub-section. 13. On the other hand learned standing counsel appearing on behalf of the Central Government submitted that in so far as there is no ambiquity in the provisions of the statute, there is no reason why this Court interfere in the matter. There is no dispute regarding the legislative competence of the Central Government in enacting the law. He also placed reliance on a few judgments to emphasise the principles of statutory interpretation. Following are the judgments:- (i) Sree Balanji Nagar Residential As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der meaning, than what appears on the face of it. It is only when all efforts to do so fail should the court declare a statute to be unconstitutional." 15. Reliance is also placed to the judgment of Rajasthan High Court in M/s.Dundlod Shikshan Sansthan & another v. Union of India and others (Writ Petition No.8672/2014 ) wherein the Jaipur Bench of the High Court had occasion to consider the constitutional validity of Section 243E of the Act. It has held at paras 4 to 8 are under:- "4. On the question of filing of appeal, for which there was no provision prior to the amendment made by the Finance Act 2015 with effect from 1-6- 2015, by which a provision of appeal has been inserted under section 246A against the order under sub-section (1) of Section 200A or sub- section (1) of Section 206CB, it was held by the Bombay High Court, in the facts of the case prior to the amendment, that simply because there was no remedy of filing appeal, the provisions of Section 234E cannot be said to be onerous. Now, since an appeal has been provided, this argument is no longer available for challenging the vires of Section 234E of the Income Tax Act. 5. Learned counsel for the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, then the law is a restriction under Article 301. However, if the law enacted is to enforce discipline or conduct under which the trade has to perform or if the payment is for regulation of conditions or incidents of trade or manufacture then the levy is regulatory. This is the way of reconciling the concept of compensatory tax with the scheme of Articles 301, 302 and 304... 7. The constitutional validity of the statutory provision is not amenable to challenged on the ground that the performance insisted upon by the statutory provision is too onerous or that the statute does not leave sufficient time or does not allow reasonable cause to be considered for violation of the provision. In G.P. Singh's Principles of Statutory Interpretation, 9th Edn., 2004, p. 497, referring to a large number of judgments of the Federal Court and the Supreme Court, it was observed that for upholding the constitutionality of a statute, the Court can construe or interpret its general words narrowly or widely. The Court must make every effort to uphold the constitutional validity of a statute, even if that requires giving the statutory provision a strained meaning, or narrower or wider meaning, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lay occurring due to non delivery of T DS statements by the deductors, it would result in delay in extending the credit of TDS to the person on whose behalf tax is deducted and consequently it would result in delayed issuance of refunds to the deductee or raising of consequential demands against the deductee which otherwise would not have been raised. In this lengthy and unwarranted process it may erode the confidence reposed by the tax payer on the department. Last but not the least, it would result in financial burden to the Government namely on account of late payment of refund interest is to be paid on such refunds and it would also result in cash flow crunch, especially for business entities. 22. It also requires to be noticed that Division Bench of High Court of Judicature at Mumbai in the case of Rashmikanth Kundalia and another v. Union of India and Others in W.P.No.771/2014 disposed of on 06.02.2015 (supra) had an occasion to examine the constitutional validity of Section 234E and while upholding its validity and arriving at a conclusion that it is intra vires of the Constitution has opined as under: "18. We are therefore clearly of the view that the fee sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was essentially in the nature of a penalty, and since the Legislature had categorically termed the levy under section 234E of the Act as a "fee", it necessarily could be levied only in the event the Government was providing any service or any special service. In the absence thereof, the said section seeks to collect tax in the guise of a fee, was the submission. This, according to the learned counsel, was impermissible either in common law or under the taxing statute, and encroached on the rights of life and liberty of the citizens. In the instant case, it was submitted that the Petitioners were providing a honorary service to the Union of India by deducting the tax of other assessees and therafter depositing the same with the Revenue. In such a situation, they could not be made liable for any delay in filing the TDS return/statements, was the submission. 8. The learned Additional Solicitor General further submitted that the title of section 234E per se indicates that the section is regarding collection of a fee. This was not a penal provision but a fee for not furnishing the TDS return/statements within the prescribed time frame as the late submission of TDS stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem. If the income tax returns, especially having refund claims, are not processed in a timely manner, then (i) a delay occurs in the granting of credit of TDS to the person on whose behalf tax is deducted (the deductee) and consequently leads to delay in issuing refunds to the deductee, or raising of infructuous demands against the deductee; (ii) the confidence of a general taxpayer on the tax administration is eroded; (iii) the late payment of refund affects the Government financially as the Government has to pay interest for delay in granting the refunds; and (iv) the delay in receipt of refunds results into a cash flow crunch, especially for business entities. 14. We find that the Legislature took note of the fact that a substantial number of deductors were not furnishing their TDS return/statements within the prescribed time frame which was absolutely essential. This led to an additional work burden upon the Department due to the fault of the deductor by not furnishing the information in time and which he was statutorily bound to furnish. It is in this light, and to compensate for the additional work burden forced upon the Department, that a fee was sought to be levied unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready passed in the case of deductees for determining their correct tax liability. Moreover, in the case of an income tax return having a refund claim, the Department has to pay extra interest due to delay in determining the correct amount of refund for want of information of tax deducted, which in turn results in delay of issue of refund. 4. The legislature took note of the fact that a substantial number of deductors were not furnishing their TDS returns/statements within the prescribed time, which has a cascading effect and creates additional work for the Income tax Department. The fee under Sec.234E is levied to address this additional work burden forced upon the Department by the deductor by not furnishing the information in time. 5. The contention of the petitioner that the levy of fee u/s 234E is not legal and valid in the absence of any quid pro quo, is not sustainable. It is settled position of law that quid pro quo, in the strict sense, was not always a sine qua non for a fee and all that is necessary is that there should be a reasonable relationship between the levy of fee and services rendered." 22. There cannot be any dispute regarding the legal propositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsequences of delay in filing the statement. It is on account of the additional work burden which has fallen upon the department due to the fault of the deductor that a fee has been levied. I do not think that a different view can be taken in the matter. 25. It is also held that the provision is not onerous even in the absence of a right of appeal as it is always open for the aggrieved person to approach the High Court under Article 226 of the Constitution of India. 26. Section 200A was amended by the Finance Act 2015 incorporating clause (c) and an order passed under Section 200A is made appealable under Section 246A. This benefit of appeal is available only after the commencement of Finance Act 2015. In the judgment of the Rajasthan High Court, reference is also made to the amendment to Section 200A that there was no provision for appeal earlier against collection of fee under Section 234E. But as per the amendment made to the Finance Act 2015, with effect from 01.06.2015, a provision for appeal has been inserted under Section 246A against an order under sub-section (1) of Section 200A. Since the appellate remedy has already been provided, the petitioner cannot contend that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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